The Toro Company

Company Overview

Business Model: THE TORO COMPANY designs, manufactures, markets, and sells a comprehensive range of professional turf maintenance equipment and services; turf irrigation systems; landscaping equipment and lighting products; snow and ice management products; agricultural irrigation ("ag-irrigation") systems; rental, specialty, and underground construction equipment; and residential yard and snow thrower products. Products are distributed globally through a network of distributors, dealers, mass retailers, hardware retailers, equipment rental centers, and home centers, as well as online and direct to end-users. Key trademarks include Toro®, Ditch Witch®, eXmark®, Spartan®, BOSS®, Ventrac®, American Augers®, Subsite®, HammerHead®, Radius®, Perrot®, Hayter®, Unique Lighting Systems®, Irritrol®, and Lawn-Boy®.

Market Position: THE TORO COMPANY is a market leader in both golf equipment and irrigation products and considers itself a principal competitor in most of its industries and markets. Its competitive advantages stem from a strong commitment to product innovation, quality, reliability, comprehensive product support, customer service, robust warranty programs, established brand reputation, strong channel relationships, effective shelf space management, product availability, and diverse financing options. The company leverages a broad product portfolio and a focused approach on its target markets.

Recent Strategic Developments:

• Acquisition of Tornado Infrastructure Equipment Ltd.: On December 8, 2025, THE TORO COMPANY acquired Tornado Infrastructure Equipment Ltd., a manufacturer of hydrovac excavation solutions and industrial equipment, for CAD $279.3 million. This acquisition is expected to broaden and strengthen the Professional segment, particularly in underground construction, power transmission, and energy markets, while expanding the company's dealer network.
• Amplifying Maximum Productivity (AMP) Initiative: Launched in Q1 fiscal 2024, this multi-year initiative is on track to achieve at least $125 million in run-rate savings by fiscal 2027, an increase from the initial estimate of $100 million. As of Q4 fiscal 2025, the initiative has delivered cumulative cost savings of $78.5 million and anticipated annualized cost savings of $86.2 million, driven by sustainable supply-base, design-to-value, route-to-market, and operational efficiency transformations.
• Spartan Trade Name Impairment: In Q3 fiscal 2025, the company recorded an $81.1 million non-cash impairment charge related to the indefinite-lived Spartan trade name intangible asset, resulting in a zero carrying value, primarily due to a decline in customer demand for its professional-grade products.
• Innovation Focus: The company maintains a commitment to funding research, development, and engineering activities to enhance existing products and develop new ones, with new products (introduced in the current and previous two fiscal years) historically contributing a significant portion of net sales. Strategic focus areas include alternative power, smart-connected, and autonomous solutions, alongside ongoing environmental, social, and governance (ESG) priorities.

Geographic Footprint: THE TORO COMPANY operates globally with manufacturing facilities in the U.S., Mexico, the United Kingdom, Italy, Romania, Germany, Poland, and China. Sales offices are maintained in the U.S., the United Kingdom, Australia, Japan, China, Italy, Poland, Germany, Spain, and Belgium. Products are sold in over 125 countries, with international net sales representing 19.5% of total consolidated net sales in fiscal 2025.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 33.4% (down from 33.8% in FY24)
• Operating Margin: 9.1% (down from 11.6% in FY24)
• Net Margin: 7.0% (down from 9.1% in FY24)

Investment in Growth:

• R&D Expenditure: $162.3 million (3.6% of revenue) in fiscal 2025.
• Capital Expenditures: $83.7 million in fiscal 2025.
• Strategic Investments: The acquisition of Tornado Infrastructure Equipment Ltd. for CAD $279.3 million.

Business Segment Analysis

Professional Segment

Financial Performance:

• Revenue: $3.62 billion (+1.9% YoY)
• Operating Margin: 19.4% (up from 18.0% in fiscal 2024)
• Key Growth Drivers: The increase was primarily driven by higher shipments of golf, grounds, and underground construction products, coupled with net price realization. This was partially offset by prior year divestitures and lower shipments of specialty construction products.

Product Portfolio:

• Golf Market: Equipment (large reel and rotary riding mowers, autonomous solutions, greens mowers, greens rollers, articulating tractors, turf sprayers, utility vehicles, aeration, bunker maintenance, specialty turf equipment, Intelli360 telematics) and irrigation products (sprinkler heads, controllers, turf sensors, valves, operating software). Brands: Toro, Ventrac.
• Sports Fields and Grounds Market: Equipment (riding rotary and reel mowers, attachments, aerators, infield grooming, articulating tractors, multipurpose vehicles, debris blowers) and irrigation products (sprinkler heads, controllers, turf sensors, valves, operating software). Brands: Toro, Ventrac, Perrot.
• Landscape Contractor Market: Equipment (gas and battery powered zero-turn radius riding mowers, heavy-duty and mid-size walk behind mowers including autonomous versions, stand-on mowers, articulating tractors, turf application, turf renovation, tree care equipment). Brands: Toro, eXmark, Spartan, Ventrac.
• Underground Construction Market: Horizontal directional drills, trenchers, vacuum excavators, guidance and support equipment, utility locators, inspection systems, pipe rehabilitation and replacement solutions, and after-market tools. Brands: Ditch Witch, American Augers, HammerHead, Subsite, Radius.
• Rental and Specialty Construction Market: Stand-on skid steers, walk-behind trenchers, stump grinders, turf renovation products, material handlers, and concrete construction equipment. Brands: Toro, Ditch Witch.
• Snow and Ice Management Market: Snowplows, salt and brine ice control products, accessories for various vehicles, articulating tractors, sidewalk snow and ice solution vehicles, and related attachments. Brands: BOSS, Ventrac, Toro.
• Irrigation and Lighting Market: Irrigation products (rotors, sprinkler bodies and nozzles, valves, drip tubing, subsurface irrigation, electric control devices, sensors, software, AI, apps) and lighting fixtures and transformers. Brands: Toro, Irritrol, Unique Lighting Systems.
• Ag-Irrigation Market: Drip tape, polyethylene tubing, drip line, emitters, filters, fitting solutions, design software, and connection options. Brand: Toro.

Market Dynamics: The Professional segment serves a diverse customer base including golf courses, sports fields, municipal properties, residential and commercial landscapes, specialty contractors for utility installations, rental companies, government customers, and landscape contractors.

Residential Segment

Financial Performance:

• Revenue: $0.86 billion (-14.0% YoY)
• Operating Margin: 4.2% (down from 7.9% in fiscal 2024)
• Key Growth Drivers: The decrease was primarily driven by lower shipments broadly across the segment, as well as the prior year Pope divestiture.

Product Portfolio:

• Walk Power Mower Products: Walk power mower equipment with various cutting widths, starter mechanisms, grass clipping discharge methods, deck types, operational controls, and power sources (self-propelled or operator-propelled push mowers). Brands: Toro, Lawn-Boy, Hayter (in the United Kingdom).
• Zero-Turn Riding Mower Products: Residential zero-turn riding mower equipment, offering superior maneuverability, with various engines, decks, transmissions, and accessories. Brand: Toro.
• Snow Thrower Products: Battery, electric, and gas-powered single-stage and two-stage snow thrower equipment, and battery and electric-powered power shovel equipment. Brand: Toro.
• Yard Tools and Garden Equipment Products: Battery, electric, and/or gas-powered grass trimmers, hedge trimmers, blower-vacuums, chainsaws, edgers, cultivators, string mowers, and related parts and accessories. Brand: Toro.

Market Dynamics: Products are sold to homeowners through a variety of distribution channels, including outdoor power equipment distributors and dealers, mass retailers, hardware retailers, and home centers, as well as online and direct to end-users.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $290.0 million, repurchasing 3,780,167 shares in fiscal 2025.
• Dividend Payments: $151.1 million in fiscal 2025, with a quarterly cash dividend of $0.38 per share (a 5.6% increase over fiscal 2024).
• Future Capital Return Commitments: On December 9, 2025, the Board of Directors authorized the repurchase of up to an additional 6,000,000 shares of common stock. The quarterly cash dividend for Q1 fiscal 2026 was increased by 2.6% to $0.39 per share.

Balance Sheet Position:

• Cash and Equivalents: $341.0 million as of October 31, 2025.
• Total Debt: $921.5 million as of October 31, 2025.
• Net Cash Position: -$580.5 million (Total Debt less Cash and Equivalents).
• Credit Rating: BBB (Standard and Poor's Ratings Group) and Baa1 (Moody's Investors Service) for long-term unsecured senior, non-credit enhanced debt, both with a stable outlook as of October 31, 2025.
• Debt Maturity Profile:| Succeeding fiscal year | Principal payments | |-----------------------:|--------------------| | 2026 | $0 million | | 2027 | $100.0 million | | 2028 | $20.0 million | | 2029 | $280.0 million | | 2030 | $0 million | | Thereafter | $525.0 million |

Cash Flow Generation:

• Operating Cash Flow: $662.0 million in fiscal 2025.
• Free Cash Flow: $578.3 million in fiscal 2025.
• Cash Conversion Metrics: Free cash flow conversion percentage was 145.6% in fiscal 2025.

Operational Excellence

Production & Service Model: Manufacturing facilities are designed for efficient and flexible assembly-line production. THE TORO COMPANY strategically integrates core manufacturing competencies such as injection molding, extrusion, welding, stamping, fabrication, laser cutting, painting, machining, and aluminum die casting. It employs Lean methods for continuous improvement and Design for Manufacturing and Assembly (DFM/A) principles to optimize product quality and reduce costs. Production levels and inventory management are based on estimates of wholesale and retail demand, considering production capacity, material and labor availability, shipment timing, and field inventory levels. The company utilizes Kanban, supplier pull, and build-to-order methodologies. Products are supported by standard warranty coverage for specified periods, covering parts, labor, and non-maintenance repairs, with separately priced extended warranty options available.

Supply Chain Architecture: The company purchases commodities, components, parts, and accessories globally. Primary cost exposures include steel, aluminum, petroleum and natural gas-based resins, linerboard, copper, lead, rubber, engines, transmissions, transaxles, hydraulics, and electrification components. Most items are commercially available from multiple sources. The company generally attempts to obtain firm pricing from suppliers for volumes consistent with planned production and demand estimates.

Key Suppliers & Partners:

• Inventory Financing: Red Iron Acceptance, LLC (a joint venture with Huntington Distribution Finance, Inc.), Huntington Commercial Finance Canada, Inc. (HCFC), and other third-party financial institutions.
• Supply Chain Finance: A third-party financial institution provides a web-based platform for participating suppliers to finance payment obligations.

Facility Network:

• Manufacturing: Facilities are located in the U.S. (Batesville, Arkansas; El Cajon, California; Riverside, California; Sanford, Florida; Mount Sterling, Kentucky; Iron Mountain, Michigan; Shakopee, Minnesota; Windom, Minnesota; Beatrice, Nebraska; Orrville, Ohio; West Salem, Ohio; Perry, Oklahoma; El Paso, Texas; Weatherford, Texas; Lake Mills, Wisconsin), Mexico (Juarez, Monterrey), the United Kingdom (Hertfordshire), Italy (Fiano Romano), Romania (Ploiesti), Germany (Althengstett), Poland (Ustron), and China (Xiamen City).
• Research & Development: Global test sites and facilities, with primary development in the U.S.
• Distribution: Distribution centers are in the U.S. (Ankeny, Iowa; Brooklyn Center, Minnesota; El Paso, Texas; Baraboo, Wisconsin; Plymouth, Wisconsin; Tomah, Wisconsin), Australia (Braeside), and Belgium (Oevel).

Operational Metrics: No specific quantitative operational metrics (e.g., capacity utilization, efficiency measures, quality indicators) are explicitly disclosed in the provided text.

Market Access & Customer Relationships

Go-to-Market Strategy: The company markets and sells its products worldwide through a diverse network of over 150 distributors, numerous equipment dealers, irrigation dealers and distributors, mass retailers, hardware retailers, equipment rental centers, and home centers. Sales also occur online and directly to end-users. The distribution networks are designed to ensure quality sales, market presence, and effective after-purchase service and support.

Distribution Channels:

• Direct Sales: To government customers, municipalities, rental companies, and end-users in certain markets.
• Channel Partners: Distributors, dealers, mass retailers, hardware retailers, and home centers.
• Digital Platforms: Online sales channels.

Customer Portfolio:

• Enterprise Customers: Includes golf courses, sports fields, contractors, government customers, municipalities, rental companies, landscape contractors, and smallholder farmers in developing countries.
• Customer Concentration: No single customer accounted for 10.0% or more of total consolidated gross sales in fiscal 2025, 2024, or 2023, indicating a diversified customer base.

Geographic Revenue Distribution:

• United States: 80.5% of total revenue ($3,632.1 million) in fiscal 2025.
• International Countries: 19.5% of total revenue ($878.3 million) in fiscal 2025.

Competitive Intelligence

Market Structure & Dynamics

The company operates in highly competitive global markets, facing numerous U.S. and non-U.S. companies. The competitive landscape varies significantly by industry, product line, end market, and geographic scope. Key competitive factors include product innovation, quality and reliability, pricing and sales programs, product support and customer service, warranty, brand and reputation, channel relationships, shelf space and product availability, and financing options.

Competitive Positioning Matrix:

Direct Competitors

The company competes with many U.S. and non-U.S. companies, some with substantially larger operations and financial resources, and others with smaller, more specialized capabilities.

Emerging Competitive Threats: New market entrants, disruptive technologies, and alternative solutions pose threats. Competitors may adapt more quickly to new technologies, such as electric and alternative fuel products. The company also faces risks from cybersquatting, typosquatting, and other domain name scams targeting its intellectual property.

Competitive Response Strategy: The company's strategy focuses on offering total solutions and full-service packages with high-quality products, incorporating the latest technology and design innovations. It leverages its broad product lines, commitment to product innovation and customer service, strong market focus, and diversified distribution channels. To maintain competitiveness, the company mitigates cost increases through targeted price adjustments, strategic sourcing, manufacturing and product portfolio optimization, and efficiency gains from initiatives like AMP. In international markets, it provides pricing support, invoices in local currency, and uses foreign currency derivative hedging instruments.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: Net sales and earnings are susceptible to adverse economic conditions (e.g., recession, inflation, reduced consumer/governmental spending, higher interest rates, reduced credit availability). Performance is tied to the health of the golf, grounds, irrigation, and construction markets for the Professional segment, and product placement, consumer confidence, spending levels, and buying patterns for the Residential segment. Technology Disruption: Inability to continuously enhance existing products or develop new, innovative products, particularly in areas like electric and alternative fuels, could lead to decreased demand. New competitive products may be superior, more cost-effective, or render existing products obsolete. Customer Concentration: While the company has diverse distribution channels, the loss of any substantial customer could have a material adverse short-term impact on its business.

Operational & Execution Risks

Supply Chain Vulnerabilities: Disruptions or shortages in commodities, components, parts, or accessories (e.g., due to natural disasters, tariffs, reliance on single suppliers, labor shortages) can adversely affect manufacturing and operating results. Geographic Concentration: International operations expose the company to various risks, including weakened economic conditions, pandemics, increased costs for product customization and certification, management complexities, trade restrictions, sanctions, geopolitical tensions (e.g., China/Taiwan, Russia/Ukraine, Middle East conflicts), longer payment cycles, higher taxes, transportation delays, and challenges in protecting intellectual property rights. Capacity Constraints: Production downtime or inability to produce products at facilities (due to supply chain issues, labor shortages, natural/man-made disasters, work slowdowns, or strikes) can disrupt manufacturing and product delivery. Ongoing facility renovations and expansions also carry risks of operational interruption and unanticipated costs.

Financial & Regulatory Risks

Market & Financial Risks: Changes in product mix, particularly a shift towards lower-margin Residential products, can negatively impact overall profit margins and net earnings. Fluctuations in foreign currency exchange rates can adversely affect operating results. Increases in the cost of commodities, components, parts, and accessories, or other operating costs, can erode profit margins. The company's sales are also dependent on the availability and terms of credit offered to its customers. Credit & Liquidity: The company relies on credit arrangements, and a downgrade in its credit ratings could increase funding costs or limit access to capital. Non-compliance with debt covenants could lead to the termination of credit facilities and accelerate debt repayment. Regulatory & Compliance Risks: The company is subject to extensive and evolving international, federal, state, and municipal laws and regulations covering areas such as climate change, emissions, water usage, product safety, chemical use, import/export compliance, worker health and safety, energy efficiency, and data privacy. Compliance is costly, and non-compliance can result in fines, reputational damage, or restrictions on sales. New climate change legislation, such as California's zero-emission mandate for small off-road engines, could significantly impact product offerings and market demand.

Geopolitical & External Risks

Geographic Dependencies: Operations in countries with political, economic, and/or social instability expose the company to heightened risks. Trade Relations: The imposition of, or changes to, tariffs (e.g., U.S. tariffs in fiscal 2025 and potential retaliatory tariffs) and other trade restrictions can increase costs, reduce the availability of raw materials, impact customer demand, and complicate demand forecasting. Sanctions & Export Controls: Compliance with U.S. and international sanctions and export controls can limit business activities with sanctioned entities or countries.

Innovation & Technology Leadership

Research & Development Focus: THE TORO COMPANY maintains a longstanding commitment to innovation and quality, investing in research, development, and engineering activities to improve existing products and develop new ones. The company utilizes "Voice of the Customer" tools to develop products that meet customer expectations and Design for Manufacturing and Assembly (DFM/A) tools to reduce production costs. A significant portion of net sales is historically attributable to new and enhanced products.

Core Technology Areas: The company's R&D efforts focus on alternative power, smart-connected, and autonomous solutions across its Professional and Residential segments.

Innovation Pipeline: The company has a continuous innovation pipeline, with new products (introduced in the current and previous two fiscal years) historically representing a significant portion of its net sales.

Intellectual Property Portfolio: THE TORO COMPANY owns patents, trademarks, and trade secrets in the U.S. and internationally. Key trademarks, such as the Toro® name and logo, are integral to its business identity. The company actively reviews patents and trademarks to avoid infringement and protect its proprietary rights, engaging in litigation when necessary.

Technology Partnerships: The company pursues targeted and strategic acquisitions to acquire innovative technologies that complement existing brands and enhance its product portfolio.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The executive management team and Board of Directors have undergone significant changes during the past three years.

Board Composition: The Audit Committee of the Board of Directors provides oversight for the company's cybersecurity program.

Human Capital Strategy

Workforce Composition:

• Total Employees: 9,227 as of October 31, 2025 (average of 9,791 during fiscal 2025).
• Geographic Distribution: Employees are distributed globally.
• Skill Mix: Not explicitly detailed in the filing.

Talent Management:

• Acquisition & Retention: The company conducts regular compensation market benchmarking to offer competitive pay. Total rewards packages, which vary by country/region, include annual incentive opportunities, stock-based compensation, 401(k) plans with matching, discretionary profit-sharing, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, flexible work schedules, adoption and surrogacy assistance, employee assistance programs, and tuition assistance.
• Employee Value Proposition: The company emphasizes a culture of trust, respect, and a productive, supportive work environment, with a focus on employee wellness and environmental stewardship.

Diversity & Development:

• Diversity Metrics: The company has goals to increase the number of women and racial and ethnic minorities in leadership positions.
• Development Programs: A wide range of professional development opportunities are offered, including apprenticeships, job training, mentoring, coaching, leadership development (e.g., Leadership in Motion program), tuition reimbursement, and vocational training.
• Culture & Engagement: The company fosters an inclusive community where employees are encouraged to leverage their unique strengths and experiences. Employee engagement surveys are conducted to gather feedback and enhance the employee experience.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: The company has plans to reduce certain greenhouse gas (GHG) emissions over time.
• Carbon Neutrality: The company has net-zero commitments and achievement milestones.
• Renewable Energy: The company focuses on clean energy adoption and sourcing strategies.

Supply Chain Sustainability: The company engages with suppliers on ESG requirements and supplier diversity programs. It also focuses on responsible sourcing of materials, including compliance with conflict minerals regulations.

Social Impact Initiatives: The company supports community investment through philanthropic programs, local community support, employee volunteerism, corporate giving, and in-kind product donations. Its "Land. Water. Thrive." initiative provides immersion experiences for employees to work with smallholder farmers in developing countries, improving land productivity and agricultural water practices. The company also has a Human Rights Policy prohibiting child labor and forced labor.

Business Cyclicality & Seasonality

Demand Patterns: The company's businesses are seasonal due to global weather patterns. Shipment volumes generally precede and overlap the key selling seasons of its channel partners. Historically, shipment volumes are highest in the fiscal second quarter, and retail demand is generally highest in the fiscal third quarter. Accounts receivable balances typically increase in the first half of the fiscal year and decrease in the second half.

• Seasonal Trends: Shipments of Residential lawn and garden products primarily occur between February and June, while Residential snow thrower products are shipped mainly between July and January. Professional segment product sales are also seasonal but are somewhat tempered by longer selling seasons in Southern U.S. and Southern Hemisphere markets. The BOSS and Ventrac brands offer counter-seasonal snow and ice management products, with shipments primarily from April to December. The rental, specialty, and underground construction business is generally less seasonal.
• Economic Sensitivity: Seasonal weather conditions, including severe wet or dry conditions, significant weather events (e.g., fires, hurricanes, drought, unseasonably warm winters), and those exacerbated by global climate change, can adversely or positively affect sales, demand, and field inventory levels.

Planning & Forecasting: Production levels and inventory management goals are based on estimates of wholesale and retail demand for products, taking into account production capacity, commodity, component parts, and labor availability, timing of shipments, and field inventory levels.

Regulatory Environment & Compliance

Regulatory Framework: The company's business, operations, facilities, and products are subject to numerous international, federal, state, and other governmental laws, rules, and regulations.

Industry-Specific Regulations:

• Environmental & Emissions: Regulations from the U.S. Environmental Protection Agency (EPA), California Air Resources Board (CARB) (including net-zero emissions requirements for small off-road engines for model year 2024 and onward), and similar regulators in China, the European Union (EU), and the United Kingdom.
• Sustainability Reporting: Australian Treasury Laws Amendment (Financial Market Infrastructure and Other Measures) Bill 2024 requires climate-related risk and GHG emissions reporting for financial years commencing after January 1, 2025. California Senate Bill 253 (SB 253) mandates annual Scope 1, 2, and 3 GHG emissions disclosure (Scope 1 & 2 from 2026, Scope 3 from 2027 for prior year reporting), and Senate Bill 261 (SB 261) requires biennial climate-related financial risk disclosures. The EU Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD), and EU Taxonomy have seen provisional agreement on simplification, and THE TORO COMPANY expects not to be subject to their reporting requirements. The EU Carbon Border Adjustment Mechanism (CBAM) imposes future compliance obligations, and THE TORO COMPANY is a reporting entity.
• Product & Waste Management: Extended producer responsibility laws (e.g., Waste Electrical and Electronic Equipment (WEEE) Directive), Restriction on the use of Hazardous Substances (RoHS) Directive, Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) Regulation, Battery Regulation, country of origin laws, energy efficiency laws, outdoor noise laws, conflict minerals laws (Dodd-Frank Wall Street Reform and Consumer Protection Act), California Proposition 65, electromagnetic compatibility laws, and wireless product type approvals (EU Radio Equipment Directive).
• Safety: Products may be subject to regulations from the U.S. Consumer Product Safety Commission and the U.S. National Highway Transportation Safety Administration (for vehicle and trailered products).

Trade & Export Controls: The company is subject to import and export compliance, including country of origin certification requirements, and trade restrictions.

Legal Proceedings: The company is periodically involved in litigation in the ordinary course of business, including claims for product liability, asbestos, hazardous substances, commercial disputes, employment disputes, and patent infringement cases. Liabilities for probable and estimable losses are recorded.

Tax Strategy & Considerations

Tax Profile: The effective tax rate for fiscal 2025 was 16.3%, down from 18.3% in fiscal 2024. This decrease was primarily due to the impact of the non-cash impairment charge and a more favorable geographic mix of earnings, partially offset by lower tax benefits from excess tax deductions for stock compensation. The adjusted effective tax rate for fiscal 2025 was 17.8%, compared to 18.8% in fiscal 2024, primarily due to a more favorable geographic mix of earnings.

• The company has domestic net operating loss carryforwards of $1.1 million (federal, no expiration) and $2.8 million (state, no expiration), plus $1.0 million (state, expiring between fiscal 2038 and 2045). Foreign net operating loss carryforwards are approximately $8.8 million ($8.6 million no expiration, $0.2 million expiring between fiscal 2035 and 2041). Domestic credit carryforwards are $3.5 million, expiring between fiscal 2027 and 2043.

Geographic Tax Planning: The company expects $27.6 million of undistributed foreign earnings to be indefinitely reinvested, with any future repatriation not expected to result in material deferred tax liabilities.

Tax Reform Impact: The "One Big Beautiful Bill Act" (OBBB), signed July 4, 2025, made permanent many 2017 U.S. tax provisions, including 100% bonus depreciation (effective for the current fiscal year), deduction of U.S.-based research expenditures, interest expense deduction, foreign-derived intangible income (FDII), Global Intangible Low-Taxed Income (GILTI), and base-erosion anti-abuse tax (BEAT). Other OBBB provisions will phase in between fiscal 2026 and 2027. The company is evaluating the impact but does not expect a material effect on results of operations. The OECD Pillar Two Model Rules Framework (15% global minimum tax) did not have a material impact.

Insurance & Risk Transfer

Risk Management Framework: THE TORO COMPANY is self-insured for certain losses related to employee medical, dental, workers' compensation, and specific product liability claims. Catastrophic claims are covered by specific stop loss insurance to limit exposure.

Insurance Coverage: The company purchases insurance coverage for catastrophic product liability claims that exceed its self-insured retention levels.

Risk Transfer Mechanisms: The company actively manages foreign currency exchange rate risk by entering into various derivative instruments, primarily forward currency contracts, to hedge against such risk.